… in June 2009 has been the weakest since the Second World War.
…. the FTSE 100 increased 1.8%, while the FTSE 250 improved 2.4% and the Aim All Share at 744.5 gained 0.5%. The Chairman of the Federal Reserve left the option open to stimulate US GDP with further Quantitative Easing (QE3) should it be needed. Sovereign debt remains an open sore not helped by double dip recession concerns while Equity markets are hoping growth will just remain weak with the UK second quarter at just 0.2%.
….. the US will report employment data on Thursday there are Jobless Claims and Friday the Unemployment rate, which are market sensitive indicators. In the UK on Thursday the useful Purchasing Managers Index (PMI) is reported, an indication of the forward trend in manufacturing. The likely lack of awful news should help markets to continue to improve.
Richland Resources (RLD) – £11m at 9.5p
Richland Resources recovered strongly in the first half of 2011 and it is in the process of diversifying into new areas. Richland was formerly known as Tanzanite One but it changed its name to reflect its broader focus. Tanzanite remains the core of the business but the company intends to become a wider ranging gemstone producer. The first project is a tsavorite mine, which has a JORC-compliant indicated resource of 2.1m to 5.2m tonnes, within an inferred resource of 18.2m to 24.9m tonnes. This project is located 20km away from the tanzanite mine in Tanzania. Bulk sampling will be undertaken in the second half of 2011. Richland has entered into an option over a sapphire project in Australia. That option cost A$120,000 and the total cost could be A$1.2m and 18m shares. There are plans for a Dares Salaam Stock Exchange listing and the share issue will happen after this listing is obtained. Revenues improved from $8.55m to $10.4m in the six months to June 2011. Reduced admin costs helped pre-tax profit to jump from $739,000 to $2.17m. This reflects an even stronger improvement on the second half of 2010 when Richland made a loss. The share price is well below the net asset value of $0.336 (21p) a share. Ambrian forecasts 2012 earnings of 3cents (1.8p) a share for P/E of 5x.
There was $1.75m in the bank at the end of June 2011. Net cash was $375,000. Strong sales at the end of the period meant that cash generation was poor in the first half. The increased debtors should be turned into cash in the second half.
Molins (MLIN) – £19.36m at 96p
Interims to 30th of June, showed that despite a 4% fall in turnover to £38.8m profits doubled. Molins is a 100 year old manufacturer of for products such as tea, tobacco and increasingly the fast moving consumer good sectors. PBT at £2.4m was against £1.1m and due to a combination of favourable factors including cost reductions, an improved product mix towards Scientific Services and Packaging with a strengthening order books.
The Scientific Services division (24% of revenue) has invested in new products and methodologies. It provides quality control and analytical equipment and services to the global tobacco industry. The machinery is to sustain controls across all stages of the production cycle to deliver a more consistent product. Tobacco Machinery accounts for 41% of revenue and is the original core business but has required considerable restructuring in recent years to remain competitive in a mature and consolidating market and a further £0.3m exceptional cost was incurred in the first half. Packaging Machinery is 35% of revenue and designs and manufactures innovative, high performance process and packaging machinery. Products are supplied largely to the food manufacturing, personal care, healthcare and other FMCG markets. Molins profits for the year end December 2011 are forecast at £4.1m giving an EPS of 14.4p so a prospective P/E of 7x while yielding 5.2%. There is net cash of £6.3m or 31p a share and an NAV of 248p.
There is a substantial deficit on the pension scheme in the UK and three small schemes in the US, with aggregate liabilities of £328m at June 2011. The overall figures are large in relation to shareholders’ funds of just £50m. In response to the 2009 actuarial valuation, the group will pay £1.2m per year as part of an agreed deficit recovery plan.
The focused is on the organic development with targeted product development but supported by acquisitive growth where appropriate. The shares have moved ahead since the interims but the valuation remains unkind so making acquisitions a hurdle.
Lipoxen (LPX) – £14m at 7.8p
Lipoxen has secured additional cash from a Russian investor at a premium to the current share price. SynBio, which is part-owned owned by Russian state-owned biotech company RUSNANO, is injecting £12.2m at 11p a share. A valuation carried out by KPMG suggested an even higher valuation for the shares but the two sides decided on 11p a share. Up to £1.95m will be raised from a one-for-10 open offer at 11p a share. SynBio will also hold 11.08m five-year warrants exercisable at 33p a share. Lipoxen non-executive director Dr Dmitry Genkin is also a shareholder in SynBio, which could end up owning nearly 48% of Lipoxen, which will enter into a co-development agreement with the Russian firm. This will involve establishing proof of concept on potential drugs Lipoxen is also acquiring German research and development specialist SymbioTec for £8.8m in shares at the placing price. SymbioTec has the rights to OncoHist, which is currently involved in a Phase-IIb Russian trial addressing acute myeloid leukaemia. The data from this trial is expected before the end of 2013. OncoHist could also be used ofr other forms of cancer. Lipoxen is regaining control of 14 potential drug candidates from Serum Institute of India Ltd, which will also invest £275,000 in Lipoxen. Warrants with an exercise price of 20p a share could raise a further £1.5m in 12-24 months time. Lipoxen is changing its name to Xenetic Biosciences
The cash from the latest fundraising will give the company enough funds for at least two years.
Escher Group Holdings (ESCH) – £29m at 168p
Escher Group supplies point of sale software to post offices around the world. The company is based in Ireland but its origins are in Boston in the US. As the volumes of mail decline post offices seek to offer additional services in order to generate more revenues. Escher’s software enables new product lines to be added more easily and efficiently. The Riposte software is used in 30 countries and territories and handles more than 13bn transactions a year. The customer base includes An Post (Ireland), Deutsche Post, Austria Post and SAPO in South Africa. Africa is a region that Escher believes will provide new customers over the coming years. New communications software has been launched which enables communications between trusted partners.
In August Escher raised £15.4m at 170p a share. Legal & General has taken a 15% stake, ISIS 10.6% and Octopus 6.9%. The flotation will help Escher to clean up its balance sheet and provide development capital for the business.